Thursday, March 08, 2018

Smart Contracts May Not be Secure

Blockchain has been cited as a major breakthrough for developing smart contracts, ie contracts that execute transactions as agreed between parties automatically. Ethereum is a widely used form of smart contract based on blockchain. For example, if a transfer of funds is agreed upon between two parties to a third party, the smart contract could make this happen as agreed. The idea is that it would be secure because of its transparency. Nobody could get away with deviating from or changing the contract because their actions would always be transparent to the parties to the contract.

Initially, this theory was not tested because blockchain was hardly ever used. However, since its inception, use has grown to the point that meaningful studies can be carried out on their effectiveness and safety.

Recent research is indicating that Ethereum contracts may not be as secure as originally thought.
For example, in 2016 a hacker stole $50 million from the Decentralized Autonomous Organization. Also, some blockchain based electronic wallets have misfired, losing money and availability to users.

Research on this important issue is ongoing, A significant study at University College London led to release of a preliminary report last week and is bound to reveal further weaknesses in blockchain contracts as it moves forward. For more on the research, click here.

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